The announcement was made as part of the bank’s first-quarter 2025 earnings report, marking the end of a four-year initiative to tap into the Embedded Finance space.
Established with the aim of partnering with fintechs to offer integrated financial services, Avenu was built from the ground up with a focus on regulatory compliance and direct integration with MainStreet’s core banking infrastructure. Despite these efforts, the unit failed to meet its financial targets.
At year-end 2024, Avenu held just USD 41 million in deposits – far short of the USD 200 million target projected after three years of operations. The subsidiary also posted a loss of USD 3.6 million for the full year, adding to mounting concerns about its financial viability.
The decision to shutter Avenu follows a substantial financial write-down in the fourth quarter of 2024, when MainStreet impaired the value of Avenu’s operating software. The adjustment led to a USD 19.7 million charge and contributed to a USD 10 million quarterly loss for the parent company. The closure reflects a broader strategic realignment, as MainStreet shifts its focus back to traditional community banking.
With Avenu no longer operational, the bank expects a reduction in noninterest expenses. Projections indicate operating costs will fall by approximately 13% to USD 12.5 million in Q2 2025, with a further drop to USD 11.5 million anticipated by year-end. These cost reductions are expected to positively impact key financial metrics, including earnings per share and return on equity.
MainStreet joins a growing list of regional and community banks that have exited the BaaS space after encountering financial or regulatory challenges. In late 2024, Blue Ridge Bancshares of Charlottesville, Virginia, completed its exit from the sector. Earlier, Financial Institutions, a USD 6.1 billion-asset bank based in New York, also announced its decision to discontinue BaaS operations in favour of focusing on its core business.
While MainStreet avoided regulatory issues, it was unable to generate sustainable returns from Avenu. Even a late-stage attempt to reposition the platform through a planned app for cannabis-related businesses failed to reverse the unit’s underperformance.
Despite the wind-down, MainStreet reported a solid first quarter in 2025. Net income reached USD 2.5 million, buoyed by efforts to manage funding costs and maintain a stable loan portfolio. Nonperforming loans stood at 1.18% of total loans, with improvements expected in the second quarter as a resolution appears likely on an USD 11.2 million commercial real estate exposure.
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